specialization

specialization

a form of division of labour whereby each individual or firm concentrates its productive efforts on a single or limited number of activities. By specializing on a single work task or JOB, an individual is usually more productive since familiarity and repetition improve work skills and time is not lost moving from one job to another. Labour specialization is a feature of PRODUCTION LINE or ASSEMBLY LINE operations used in mass production.

Likewise firms may choose to specialize in the production of a limited range of products (see HORIZONTAL INTEGRATION) to focus their business interests and to take advantage of economies of large-scale production. See ECONOMIES OF SCALE.

specialization

a form of division of labour whereby individuals or firms concentrate their productive efforts on a single or limited number of activities. If a person specializes in a single job or work task, he or she is likely to be much more efficient than if attempting

to be a jack-of-all-trades. The specialist can concentrate on the work he or she is best at doing: familiarity and repetition improve work skills, and time is ot lost moving from one job to another. For all these reasons, a person's output is greater as a result of specialization.

Similarly, specialization enables an economy to use its scarce resources more efficiently, thereby producing (and consuming) a larger volume of goods and services than would otherwise be the case. This fundamental principle can be illustrated assuming, to simplify matters, a two-person, A and B, and two-product, X and Y, economy. Let us suppose that A has the PRODUCTION POSSIBILITY BOUNDARY indicated in Fig. 176 (a) of 12X or 6Y. Thus, A is twice as efficient at producing X as he is at producing Y (an OPPORTUNITY-COST RATIO of 2X/1Y). Let us assume he chooses to produce (and consume) at point Apc on his production possibility line (6X and 3Y).

B, by contrast, has the production-possibility boundary indicated in Fig. 176 of 12Y or 6X. He is twice as efficient at producing Y as he is at producing X (an opportunity-cost ratio of 2Y/1X). Let us assume he chooses to produce (and consume) at point Bpc on his production possibility line (6Y and 3X).

Now, assume that A and B specialize in the production of the product in which they are most efficient. Thus, A specializes totally in the production of X and B totally in the production of Y. Transposing Figs 176 (a) and on to Fig%. 176, we see the establishment of a new production-possibility boundary (and a new opportunity-cost ratio of 1X/1Y) for the economy).

Specialization thus results in a . production gain, that is, the economy is now able to produce 12X and 12Y, which is 3 more X and 3 more Y than previously (see Fig. 176 ), and a consumption gain; that is, as a result of specialization and exchange, A and B can now consume more of both products. For example, A consumes 8 of the X he produces and exchanges the remaining 4X for 4Y from B (i.e. 1X = 1Y from the opportunity-cost ratio 1X/1Y). With specialization and exchange, A is now consuming 2 more X and 1 more Y. By the same token, B consumes 8 of the Y he produces and exchanges 4Y for 4X from A, thereby increasing his consumption by 2Y and 1X.

People or countries can specialize in producing particular goods only if they are able to EXCHANGE their specialized goods for other goods produced by other people or countries so that they can enjoy the consumption of a wide variety of goods. See also PRODUCTIVITY, COMPARATIVE ADVANTAGE, GAINS FROM TRADE.

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